Capital Briefs: Exams Find Dip in Risky Underwriting

The Federal Deposit Insurance Corp. said Wednesday that examiners found slightly fewer instances of risky underwriting practices during the fourth quarter and the first quarter.

Three percent of examiners said that banks they reviewed had failed to adjust credit prices to reflect increases in risk, down from 5% in the preceding six months.

The vast majority of examiners, however, said the banks they supervise showed no material changes in credit quality.

The survey includes data from 958 banks that were examined in the six months through March 31. Only 3% of the examiners described the loan portfolios they reviewed as "high risk." Likewise, 3% said they saw highly risky underwriting practices.

Examiners reserved most of their concerns for banks involved in agricultural lending.

For farm banks, 29% of examiners said they saw a "moderate" increase in the level of carry-over debt, up from 24%. Carry-over loans are extensions on credit that banks grant farmers during unprofitable seasons. Three percent of examiners found a "sharp" increase in carry-over debt, up from 2%.